# 13 / 2021

Supply of goods in times of crisis: analysis and lessons for Switzerland

Lessons from the crisis: proposals from economiesuisse

Strengthening Switzerland’s systemic resilience in crisis situations

The preceding examples show that decoupling the Swiss economy is not an effective means of strengthening security of supply in the long term. A state-supported expansion of domestic production for certain goods would be equally short-sighted.

At the same time, it is important not to focus exclusively on security of supply in the follow-up to the COVID-19 pandemic. The next crisis of global proportions may not necessarily be epidemiological in nature. Energy supply, cyberattacks, military conflicts or natural disasters also carry considerable risk. With this in mind, the current pandemic situation should be used to strengthen the systemic resilience of Switzerland and the international community in the long term. According to the business community, this requires various measures – both at the unilateral as well as at the bilateral and multilateral levels.

Unilateral measures

  • No protectionism in the context of security of supply: trade-restrictive measures should only be used for a limited period of time, in a proportionate manner and as a last resort. New trade restrictions or state subsidies to promote Swiss production are to be avoided.
  • Ensure security of supply with sufficient legally required compulsory stocks: legally required compulsory stocks should be reviewed and expanded where appropriate (e.g. re-establishing a compulsory ethanol stockpile). Larger end users of critical goods (e.g. hospitals) should also take responsibility for reviewing their own storage strategy.
  • ‘Just-in-case’ instead of ‘just-in-time’: when choosing its suppliers, companies focus on minimising costs. However, the pandemic has highlighted the risks of this strategy. For greater resilience, forward-looking inventory planning and supplier diversification should therefore be increasingly included in strategic decisions once again.
  • Improve the use of free trade agreements: SMEs in particular are sometimes unable to benefit from free trade agreements due to limited resources. Support is needed here in the form of appropriate information services and platforms.
  • Drive digital trade: companies should invest more in digital supply chain management and supply chain transparency. At the same time, the state should support the private sector’s risk management strategies by creating the right regulatory environment (e.g. digitalisation of customs processes).
  • Implement the principles of the circular economy in a meaningful way: by extending the life and useful life of goods, Switzerland can better cushion the risks of global supply chains in the long term. There is still great potential in the area of waste recycling in this country – especially for private initiatives.

Bilateral measures

  • Securing supplies in times of crisis through international treaties: supply shortages of important goods have occurred not least due to restrictions on the movement of goods by individual states. Bilateral agreements can minimise Switzerland’s exposure (e.g. assurance that export restrictions will be waived in the event of a crisis).
  • Cross-border harmonisation of conformity regulations: not fragmentation, but cross-border harmonisation of product regulations strengthens security of supply in times of crisis. This includes, for example, mutual recognition agreements (MRAs).

Multilateral/plurilateral measures

  • Further development of market access: improve existing agreements with those countries where the largest increases in trade can be expected. Despite its dense network of free trade agreements, there is much potential for Switzerland in this regard (e.g. with the US, MERCOSUR or India).
  • Strengthening the WTO and further development of multilateral trade rules: for Switzerland as a small economy, trade liberalisation achieved through the World Trade Organisation (WTO) is clearly the ‘first-best solution’. For example, it should support the WTO Trade Facilitation Agreement to accelerate trade in essential goods.
  • Intensify cooperation in research and development: Switzerland must maintain its leading position and intensify its exchange with the strongest research centres worldwide. Innovation also contributes to resilience for future crises, as the example of mRNA technology shows. The latter has been researched for years as a possible treatment against cancer. Through its successful application in vaccines, a surge in innovation in the field of cancer treatment is now conceivable.
  • Acceleration of certification and market authorisation processes: Efficient certification processes increase the international availability of critical goods (e.g. clinical studies conducted in parallel for the approval of vaccines).
  • Aim for regional cumulation in trade in goods: the creation of a ‘cumulation region’ between several common trading partners would enable Switzerland to take inputs from this cumulation region into account when manufacturing a product. This would facilitate trade and strengthen competitiveness.
  • International coordination of production capacity: greater coordination of production in times of crisis should be promoted at continental level (e.g. for active medical substances).
  • Transparency of supply and demand of critical goods: there is a need for a timely and comprehensive exchange of information between business and politics, both nationally and internationally. This is because uncertainty fuels protectionist policies. For example, a communication channel between vaccine manufacturers and other stakeholders could raise awareness of shortages.